Small Businesses and the Affordable Care Act

You know the value of providing health insurance to your employees.  But the legal technicalities can be a real challenge for small businesses.  The Affordable Care Act offers rights and protections, choices and tax credits; but what about mandates, restrictions and penalties?  On average, small businesses pay about 18% more than large firms for the same health insurance policy because they lack the purchasing power that larger employers have.  Below are some key points that may affect your small business.

Is My Business Covered?

If you have up to 25 employees, pay average annual wages below $50,000 and provide health insurance, you may qualify for a small business tax credit of up to 35% or your premium contribution (up to 25% for non-profits) to offset and bring down the cost of providing insurance to your employees.  The maximum credit will be available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000.  To be eligible for a tax credit, the employer must contribute at least 50% of the total employee premium cost.  Businesses that receive state health care tax credits may also qualify for the federal tax credit.  Dental and Vision care qualify for the credit as well.  For 2014 and beyond, small employers who purchase coverage through the new Health Insurance Exchanges can receive a tax credit for two years of up to 50% (up to 35% for non-profits) of their contribution.

Do My Retired Employees Qualify for Any Programs?

Under the health care law, employer-based plans that provide health insurance to retirees ages 55-64 can now get financial help through the Early Retiree Reinsurance Program.  This program is designed to lower the cost of premiums for all employees and reduce employer health costs.  Health insurance premiums for older Americans are over four times more expensive than they are for young adults, and the deductible these enrollees’ pay is, on average, almost four times that for a typical employer-sponsored insurance plan.  Businesses, other employers, and unions that are accepted into the program will receive reimbursement for medical claims for early retirees and their spouses, surviving spouses, and dependents.  Savings can be used to reduce employer health care costs and provide premium relief to workers and their families.  Applicants who are approved into the program receive reinsurance for the claims of high-cost retirees and their families (80% of the costs from $15,000 to $90,000).  The program ends on January 1, 2014 when State health insurance exchanges are up and running.

What Options Are Available for Small Businesses?

In 2014, small businesses with generally fewer than 100 employees can shop in an Affordable Insurance Exchange, which gives you power similar to what large businesses have to get better choices and lower prices.   Access to purchase health insurance coverage through the exchange is limited to citizens and lawful residents. Individuals with income up to 400 percent of the federal poverty level (FPL) may be eligible for premium subsidies and cost sharing reductions for coverage purchased through the exchange.  Exchange eligibility determinations must be streamlined and coordinated with eligibility determination for Medicaid and the Children’s Health Insurance Program (CHIP).

What Is a Qualified Health Plan?

A qualified health plan is a health plan that is certified to provide essential health benefits and is offered by a health insurer licensed and in good standing to offer health insurance coverage who agrees to offer at least one qualified health plan in the silver level and at least one plan in the gold level, who agrees to charge the same premium rate for each qualified health plan in and out of the exchange, and who complies with other requirements of the exchange.    Qualified health plans will have a minimum actuarial value and be categorized according to their actuarial value as Bronze, Silver, Gold, or Platinum.

What are the Minimum Coverage Requirements?

Essential health benefits adopted by Health and Human Services (HHS) will be the minimum coverage requirements for qualified health plans that include at least ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care.

 What If I Have Less Than 50 Employees?

Employers with fewer than 50 employees are exempt from new employer responsibility policies.  They do not have to pay an assessment if their employees get tax credits through an Exchange.  The Affordable Care Act does not require employers to provide health insurance for their employees.  The Employer Responsibility provision of the Affordable Care Act applies to businesses with more than 50 full-time workers.  In 2014, the Affordable Care Act will require large employers to pay a shared responsibility fee only if they do not provide coverage and taxpayers are supporting the cost of health insurance for their workers through premium tax credits.

Is There Anything on the Internet That Might Help?

In 2010, the Department of Health and Human Services established a new consumer website with easy to understand information about affordable and comprehensive coverage choices.  The website also provides information to small businesses about available health coverage options, including information on reinsurance for early retirees, small business tax credits and how to shop for insurance in the Exchanges that will increase the purchasing power of small businesses.

For more information, please contact your agent or Hill Insurance Agency LP.

Hill Insurance Agency LP is an independent insurance agency and a member of the Independent Insurance Agents of Texas (IIAT).  We represent a number a national and regional insurance carriers, and have broker relationships with access to over 200 carriers.

Resources:, Department of Labor, Internal Revenue Service and Texas Department of Insurance

This article provides information about the law designed to help users with their business needs.  But legal information is not the same as legal advice — the application of law to a business’ specific circumstances and needs.  Although we make efforts to ensure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurances that our information, and your interpretation of it, is appropriate to your particular situation.